This article first appeared in The Edge Malaysia Weekly on September 18, 2023 - September 24, 2023

YINSON Holdings Bhd is keen on exporting renewable energy (RE) to Singapore, joining a list of companies seeking to capture the lucrative market that needs as much as 4gw of imports in the city state by 2035, according to sources familiar with the company.

It is understood that Yinson is looking for a partner with expertise in battery energy storage systems (BESS) to prepare for the new venture.

Yinson declined to comment on the matter when asked.

However, this raises questions about how Yinson will work out its proposal given that there is little information on the RE export framework — for instance, the wheeling charges on the usage of the national grid, quota required for local consumption and RE export mechanism, all of which will affect the exporters’ costing.

Still, some local players have already signed memorandums with retailers in Singapore as an expression of interest, ahead of Singapore’s Dec 29 deadline for its request for proposal (RFP) to appoint licensed electricity importers.

The situation is different in other countries with whom Singapore has initiated several pilot projects.

This month, the city state granted conditional approval to import up to 2GW from Indonesia across five projects, with a capacity of 11 gigawatt-peak and approximately 21 gigawatt-hour battery capacity by end-2027. It came concurrent with a collaboration to explore a new interconnection between the two countries.

This adds to other plans in Australia to export 1.7gw of electricity to Singapore, and another 1gw from Cambodia to the island-state, both via undersea cables.

Currently, Malaysia has a two-year pilot project to export 100mw of gas power-generated electricity to Singapore, first announced in January this year.

In Malaysia, the indications by the government so far are that participants will need to spare some capacity for local demand, and that there will be an RE exchange to act as a market aggregator for price discovery purposes.

“Unlike Indonesia, Malaysian private players are just making assumptions on the model and pricing involved,” says one industry player. “Malaysia is in the best position to export to Singapore, but we have yet to strategise [between industry players and the government] … there is no sharing of information at all from the authorities.”

Even Sarawak keeps toying with the idea of direct transmission to Singapore despite the peninsula’s closer proximity, the player says.

The solar asset operator concedes that an aggregator model will have its advantages, as it could help protect asset owners by limiting the excessive price competition seen in Large Scale Solar (LSS) bids in the past.

By pooling the generation capacity, Malaysia will have the bargaining power to speak to Singapore and address any issues with the specification required by the importer, he adds.

When players show their cards without having all the information, the counterparty will have the upper hand in terms of price discovery, the player says.

“This is of course not positive to Malaysia. But the guidelines and framework for Singapore [are] 100% ready. Our regulator does not disclose much information to the industry,” he adds.

Industry players are eagerly waiting for the Malaysian government to unveil its next move after the announcement on the lift of the ban on RE exports, considering the higher returns expected in Singapore’s liberalised energy market, coupled with the potential foreign exchange gains.

One of the local players vying for a piece of Singapore’s RE market is YTL Power International Bhd, which has an electricity retail unit in Singapore with a two-year trial import licence and an upcoming solar photovoltaic (PV) plant of up to 500mw in Kulai, Johor.

The others are Kencana Sdn Bhd, with 38mw of solar PV assets operational in Malaysia, and public-listed Solarvest Holdings Bhd with 50mw of capacity due for commissioning this year.

Yinson has indeed already ventured into RE as part of its energy transition strategy. It now operates 2.3mw of solar capacity in Malaysia, mainly through rooftop solar installations in the commercial and industrial (C&I) segment with partner Plus Xnergy.

While its existing solar PV operations in Malaysia are relatively small, some view it as well positioned in the LSS segment.

The company, through indirect majority-owned Rising Sun Energy, operates RE assets in India, including the 140mw Rising Bhadla 1 & 2 solar PV plant, and the 190mw Nokh solar park targeted for deployment by the end of this year.

It has a track record in high capital expenditure (capex) projects to deliver floating production storage and offloading vessels (FPSOs), the costs of which are at times north of US$1 billion (RM4.7 billion) each. This compares to LSS projects, which could reach RM170 million in construction costs for 50mw, excluding other expenses such as land costs.

Yinson also has a green technology unit headquartered in Singapore, whose services range from electric-vehicle charge point operations to EV leasing and micro-mobility.

At end-April, the group had a cash balance of RM2.02 billion against total borrowings of RM10.52 billion. Its net gearing stood at 1.8 times, compared with around 1.3 times among local utility players, according to data from Asia Analytica.

In the first quarter, Yinson’s net profit rose 73.3% year on year to RM208 million from RM120 million, as revenue rose nearly threefold to RM3.02 billion, from RM1.01 billion. Its core floating asset business has eight FPSOs and one floating storage and offloading unit in Asean, the Americas and Africa, with a firm period lasting up to 2047.

“Many banks are willing to loan such players up to 90% of the capex required for solar RE projects,” an analyst comments.

The analyst is not enticed, however, where valuations are concerned, citing lower internal rate of return than traditional oil and gas projects. “Cost overruns with such projects tend to be common. Moreover, RE will push costs higher which can affect demand, so margins won’t be that attractive,” the analyst says.

“I won’t expect any significant rerating if anyone wins … Although it helps to improve the company’s ESG (environmental, social and governance) profile,” the analyst adds. 

Save by subscribing to us for your print and/or digital copy.

P/S: The Edge is also available on Apple's App Store and Android's Google Play.